debtcare.ca

Category: Dealing With Debt

  • Where To Get Online Debt Help — Payday Lenders Are NOT The Answer!

    During the COVID-19 pandemic, many Canadians have lost their jobs or are receiving reduced income.

    But while incomes have declined, debt payments haven’t necessarily done the same.

    Some lenders offered loan deferrals, but it’s important to note that deferrals aren’t forgiveness. What this means is that you will have to pay those debts eventually — and it may come with extra costs, such as interest for the deferral period.

    And not all lenders have even offered these deferrals. Some may expect you to keep making your payments throughout the COVID-19 pandemic, plus your other bills, like housing and utilities.

    If you’re in this boat, you might need help to get out of debt.

    The Problem with Payday Loans

    Payday loans should be avoided completely if you want to get out of debt.

    The simple truth is that payday loans rarely (if ever) actually improve your finances. This is because:

    • They’re short-term. They need to be repaid within 14 to 62 days.
    • They come with sky-high interest rates. Payday lenders often charge an annual interest rate of between 391% and 652%!

    The worst part is that payday loans trap you into a vicious cycle that creates more debt.

    Take this scenario:

    • You take out an advance on your paycheque for $750, plus fees and interest.
    • That money must be paid back within three weeks, or 21 days.
    • You receive your next paycheque, but your other bills have come due and you need the pay to pay for those obligations.
    • You’re unable to pay back the payday loan – what do you do?

    For most people, the answer is take to out another payday loan, which creates an unending cycle of paying off debt with more debt.

    During the COVID-19 pandemic, payday loans are even more unsustainable. If your income has been affected, you may not have another paycheque to find the funds, or you could be dipping into emergency help benefits, such as CERB payments.

    Where to Get Online Debt Help During the COVID-19 Pandemic

    There are other options to get out of debt besides payday loans.

    You might consider:

    • Budget management.
    • Financial restructuring or debt consolidation.
    • Settling outstanding debts.
    • Refinancing your mortgage.
    • Special programs (such as the access DebtCare Canada provides to a program that can resolve a CRA back tax problem).
    • Filing for insolvency – bankruptcy or a consumer proposal.
    • And more.

    The exact options will depend on your situation. At DebtCare Canada, our consultants look at your whole financial picture to find the best solution for you.

    During COVID-19, you’ll need to get online debt help to maintain physical distancing. DebtCare has been able to operate 100% remotely since the start of the pandemic. You can book a free consultation by:

    • Calling 1-888-890-0888
    • Texting “HELP” to 1-888-890-0888
    • Visiting debtcare.ca/

  • Affordable Housing in Toronto is Still a Major Problem

    Affordable housing in Toronto has been difficult to find for a while now — but despite hopes that it would get better, it is still a major problem for many.

    A recent report from Zoocasa determined that in the Greater Toronto Area, it would take 32 years for a household earning a median income to save a down payment for a typically-priced home.

    And for those renting instead of buying, affordable housing isn’t much better.

    The Canadian Rental Housing Index recently determined that in 20 Canadian ridings — including some in the Greater Toronto Area such as Willowdale, Thornhill, Richmond Hill, Markham-Unionville, University-Rosedale, and more — at least 25% of renters are spending 50% or more of their income on rent alone.

    At least 48% of renters are spending 30% or more of their income on rent.

    “Housing is typically considered affordable if a household spends less than 30% of its before-tax income on rent plus utilities,” the Index stated.

    See more of the Index results here: http://rentalhousingindex.ca/en/#intro

    With increases to home prices and rental rates, it’s no wonder that it’s getting harder and harder to make ends meet. It’s too expensive to live in the Greater Toronto Area and other major cities, and lenders know it.

    If you are in this situation, what can you do?

    While this is a tough situation to be in, the first thing to do is try to free up room in your budget. If you are using credit to balance the shortfall, you may find that doing away with the debt frees up the cashflow you need to pay rent or save more for a down payment.

    Debt can harm your budget in two ways:

    First, it can get in the way of your cashflow. If you are always making debt payments (like paying off your credit card balance plus interest) you’re spending money you could use elsewhere.

    Second, many lenders use your total debt service ratio (TDS) to determine how much you can afford to borrow — particularly when it comes to a mortgage. In addition, carrying too much debt can hurt your credit score, which makes it harder to be approved for low-interest loans. If you are hoping to get a mortgage in the near future, or renew an existing one, lowering your total debt-to-income ratio will only help.

    While getting out of debt won’t make Toronto’s home and rent prices drop, it can make it easier for you to balance your budget and save money at the same time.

    DebtCare Canada helps Canadians deal with outstanding debt. We’ve helped thousands of people reduce or restructure their debt, repair and rebuild credit, access financial help, and more.

    Contact us today for a free assessment to see how we can help you manage your budget while dealing with the lack of affordable housing in Toronto and the GTA.

    Call 1-888-890-0888 or visit www.debtcare.ca.

  • Protecting Your Home Through Financial Restructuring

    Having financial troubles can be stressful no matter where you are in life – but it’s doubly so if you own a house.

    There’s a common fear that financial restructuring will mean losing your home. Fortunately, there are ways to protect against this.

    The first thing to do is to make sure that you stay up-to-date with your mortgage payments. If you haven’t defaulted on your mortgage, your chances of keeping your home through a financial crisis increase greatly.

    Let’s look at some of the financial restructuring options you might have when you own your home…

    1. Debt Consolidation

    As long as your mortgage payments are up to date, a debt consolidation loan can be a good way to deal with outstanding unsecured debt.

    Unsecured debt might be credit card bills, lines of credit, your cell phone bill, etc. It is anything not tied to collateral – so your mortgage and car loan would not fall under this umbrella.

    Unsecured debt usually has a high interest rate, making your monthly payments even more expensive. This is where a consolidation loan can help. You can use the money to pay off your unsecured debts, and then pay back the consolidation loan at a fixed interest rate over a manageable schedule.

    You won’t be paying as much in interest, so you can use the extra money to keep your mortgage payments up to date.

    1. Home Equity

    Sometimes your home can actually be a source of income for financial restructuring. If you have equity available, you might be able to use it to pay off your outstanding debts – essentially, this is a form of a consolidation loan.

    Again, this is dependent on your mortgage payments being current and made on time every month.

    1. Filing for a Consumer Proposal

    If you don’t have enough equity available or aren’t eligible for a consolidation loan, filing for a consumer proposal is another option.

    Consumer proposals deal with unsecured debt up to $250,000 (excluding your mortgage). In a consumer proposal, you make an offer to your creditors to settle your debts for less than what you owe. This offer must be accepted by the majority of your creditors and you must be able to prove they’ll get more money than they otherwise would if you filed for bankruptcy.

    In most cases, you can keep your home when you file for a consumer proposal, as your assets remain untouched. Again, this depends on your mortgage payments being kept up to date and is based on you having enough income to continue paying your mortgage after the proposal.

    A good financial advisor will structure your consumer proposal based on equity.

    If you have more than $250,000 in unsecured debt, you might file for another kind of proposal or bankruptcy instead.

    1. Filing for Bankruptcy

    Filing for bankruptcy is where most people fear they will lose their home. This is because in a bankruptcy, assets are often sold to pay off debts – including in some cases your house.

    However, this doesn’t always happen – and you may able to keep your home depending on the amount of equity you have available.

    If:

    • You don’t have much equity (this varies depending on province), and
    • Your mortgage payments are up to date

    your ability to keep your home increases substantially.

    If you do have a lot of equity, you may still be able to keep your home by repaying your equity through borrowing money, or through a second mortgage.

    A good financial advisor, like those at DebtCare Canada, will also help you structure your bankruptcy based on equity.

    1. If You Can’t Afford Your Mortgage…

    As we’ve discussed, keeping your home through financial restructuring largely depends on being able to continue making your mortgage payments.

    If your mortgage is up-to-date, you’re less likely to lose your house. But what if even after consolidating debt and making a budget you don’t have enough income to make your mortgage payments?

    This can be a whole other issue – but it’s important to remember that you still have options. You might need to:

    • Make more income through asking for a raise or getting a second job.
    • Or sell your home and downsize to a smaller mortgage.

    While selling your home may not necessarily be the same thing as keeping it, it can be preferable to losing your home through having it seized. In this option, you would still retain the profits from the sale, and you could use the money to move into another, less expensive property.

    A good financial advisor, like the ones at DebtCare Canada, can help you sort through your financial restructuring options, so your home is protected.

    Contact us today for a free consultation. Call 1-888-890-0888 or visit www.debtcare.ca.

  • A Stress-Free Holiday May Start with Consolidating Your Debt

    The holidays can be a time of family, love, and joy, but they are also often a source of major stress — financial stress to be exact.

    Have you considered consolidating your debt to manage that stress?

    More than half of Canadians say that they go over their budget during the holiday season. A CIBC poll found that the average Canadian spends $643 on holiday gifts and $300 on décor and entertaining. And those figures only keep going up.

    Moneris found that after the 2017 holiday season, Canadians spent an average of 4.26% more during the last three months of 2017 than they did during the same period in 2016.

    A 2017 Angus Reid poll of 1,512 Canadians found that three-quarters of respondents wish they could save more money during the holidays and about 52% end up spending more than they liked.

    In order to avoid any long-term damage to your credit score, it’s important that you pay your bills on time each month and (preferably) in full. Making the minimum payment every month is not enough to ensure good credit.

    Plus, most credit cards come with high interest rates, so that $1,000 of debt can quickly add up to even more. If it took you five months (the average timeframe) to pay $1,000 at an interest rate of 18% you would have to make a payment of $209.09 per month and by the end of the five months would have paid $1,045.45, including interest.

    That might be okay if it is your only debt and you are not accumulating any more, but for most people that is not the case.

    While a certain amount of spending is likely expected during the holiday season, it can be particularly stressful if you are already carrying debt.

    For instance, say that you have:

    • $10,000 of debt on one credit card at 19% interest.
    • $5,000 of debt on another at 21% interest.
    • And now $1,000 on a new credit card at 18% interest.

    And you are hoping to pay it off by the next holiday season — in 12 months.

    You would then have to make monthly payments of $1,477.03. By the end of the year, you would have spent an additional $1,724 in interest. And that’s assuming you don’t accumulate any more debt or miss any payments. This also assumes you have the ability and tools to calculate the combined monthly payments of all these debts, which most people struggle with.

    It can be stressful trying to pay off holiday debt, but it helps to have a plan. That’s where consolidating your debt can come in.

    With debt consolidation, you can put all of your outstanding debts together in one monthly payment. If you choose a consolidation loan with a fixed interest rate you will only have one bill to pay each month and you will always know the amount you have to pay, so you can budget for your payments.

    This can allow you to enjoy your holidays without worrying about how you will pay for them.

    At DebtCare Canada, we can review your options and help arrange the debt consolidation that’s right for you. You’ll be able to enter the holiday season feeling relaxed and stress-free.

    Contact us today for a free consultation. Call 1-888-890-0888 or visit www.debtcare.ca.

  • Breaking Down Second Mortgage Options and Costs

    A second mortgage is an excellent tool for dealing with debt. In recent years, many Canadians have come to recognize the value of using their home to consolidate debt. Today we discuss second mortgage options and costs and the benefits of using your home to deal with debt.

    Firstly, a second mortgage is great because it has nothing to do with your first mortgage, so you can structure it like a traditional debt consolidation while taking advantage of lower interest rates.

    For example, you don’t HAVE to amortize a second mortgage over 25 years as you would with a first mortgage. You can choose to amortize it over 5 or 10 years to see the debt paid off faster.

    Secondly, using a second mortgage to consolidate debt will often result in a much lower interest rate compared to the credit products you are currently concerned about.

    There are lots of different second mortgage options depending on your equity positioning and credit standing.

    If you have good credit, a line of credit or conventional second mortgage through a bank at a great low rate are two attractive options. With a line of credit, amortization is not required and your monthly payment will be based on the balance. That being said, selecting a line of credit will mean you need to be more disciplined because minimum payments are often 1-2% of the balance and thus very little will get paid to principal if you only make minimum payments. When choosing between a conventional second mortgage and line of credit, be sure to look at how long you want to be paying the debt and reverse calculate what your payments will look like – a good mortgage broker can help you do this.

    If you have bad credit, this will likely reduce your options and can mean higher rates, albeit usually still far less than a high interest loan from a finance company. If your credit is only slightly bruised, a finance company or trust company may extend second mortgage financing to you. However, if it is really bad you will need lots of equity and your broker will likely get your mortgage financed through a private lender. Most private lenders charge on an interest- only basis, however some may allow you, as with a line of credit, to pay more than the interest if your budget will permit. In this case, you’ll also want to check if the lender offering the mortgage will allow you to make extra payments without penalty.

    Keep in mind that second mortgage financing is a mortgage so you will have some fees. Potential fees could include (and this largely depends on how good or bad your credit is – good credit means fewer fees) a broker fee (lender may pay all or part if credit is good), legal fees (often less with lines of credit), application or administration fees from lender, and an appraisal (if your mortgage is not CMHC insured).

    Going directly to a lender is never a good idea. It is better to deal with a broker because they work with ALL lenders and can explore all options to get you the best deal. This is also important if your credit is bad as only brokers can obtain private mortgage financing.

    If you’re interested in finding out more about using second mortgage financing to consolidate debt, DebtCare can help.

    Call us today at 1-888-890-0888.

     

  • Holiday Budget Planning: Tips to Keep The Season Cheerful

    holiday-budget-planningSo many of us are guilty of overspending during the holidays; the gifts, the outfits, the events, the food. All of this spending can quickly spiral out of control, turning what should be a joyous season into a stressful one. This is especially true if we start early and don’t keep track of what we’ve purchased. This year, keep the stress at bay with these holiday budget planning tips.

    Set a budget – and stick to it! This should always be the first order of business. Take a realistic look at your bank account and set a total that you can spend without setting yourself up for a massive bill once the holidays are over. Set an amount for each person you need to buy for and stick to it.

    A great way to do this is with the envelope system. Once you’ve set an amount, put that amount in an envelope with the receiver’s name on it. Once the envelope is empty, that person is done.

    Keep a list. All too often we buy, assume we are finished, and then see ‘that perfect gift’ that so-and-so just can’t live without. Trust us, they can. Keep a list of what you’ve purchased for each person, and consult it when you’re wondering if you have ‘enough’.

    Go DIY. Personal, hand-made items are often far more special than something purchased from a store. Take advantage of the countless boards on Pinterest and make some gifts. Just be careful, some DIY gifts are actually pretty costly, so just price out the items before diving in.

    Host a potluck. It isn’t just the gift giving that adds up around the holidays. Hosting a big party and providing food for all of your guests can get pretty costly. This year, instead of handling all of the food yourself, ask guests to bring their favourite holiday dish. This not only spreads the spending around, it may just open your eyes to new recipes to add to your cookbook!

    Start saving now for next year. Now is the time to start thinking about saving up for next year. Once the holidays end, start putting away even just a few dollars a week – once next November rolls around, you’ll have an impressive little nest egg from which to draw.

    Have a plan to deal with holiday debt. If you know that, no matter what you do, your budget won’t be able to handle the extra spending, and your credit will take a major hit, have a plan in place to deal with the debt.  Get in touch with a financial specialist to discuss all of the options available to you and get ready to start 2017 off on fresh financial footing.

    At DebtCare, we know how tough the holidays can be when money is a concern. Let us help.

    Get in touch today to find out about strategies to deal with debt before it gets any worse. 1-888-890-0888.

     

     

  • Can I File a Consumer Proposal and Keep My House?

    debt2You’ve likely heard the radio ads or seen the commercials on television citing the benefits of consumer proposals. If you’re an individual and your total debts do not exceed $250,000 (not including debts such as a mortgage secured by your principal residence), a consumer proposal might just be the best solution.

    Consumer proposals have been around for a long time, but it has been over the last decade or so that they’ve become popular as a viable solution for dealing with debt. Filing a consumer proposal is a legally binding process which involves a financial settlement to your creditors based on an accepted amount, your income and ability to repay. This often involves reducing your debt.

    Some assume, incorrectly, that a consumer proposal and bankruptcy are one and the same. While both are ultimately administered by a trustee, and both are valuable tools when you’re in over your head financially, they are actually quite different. In bankruptcy, you make monthly payments to a trustee. While undischarged, you must participate in credit counselling, report income, etc., to the trustee. You are insolvent and all of your relevant assets and income are vested in the trustee until you are discharged. The trustee in bankruptcy remains in your life until you are discharged.

    In a consumer proposal, an amount of money is proposed to your creditors with a 4-5 year repayment schedule. Once your creditors accept your proposal it is binding and can be paid in full at any time thereafter. Unlike bankruptcy, you are not “undischarged” and you do not have any obligations to the trustee other than making your monthly payments.

    One of the most common questions we receive when individuals come to us looking for debt help is if they can keep their house if they file a consumer proposal. The answer is yes. As long as you are able to continue making your monthly mortgage payments, your mortgage lender cannot foreclose or change the terms of your mortgage just because you’ve filed a consumer proposal.

    As mentioned, a consumer proposal is a legally binding agreement administered by a trustee. However, in order to reach the best settlement possible – one that benefits your creditors and one which you can realistically meet – you are best served by going to a debt specialist rather than going directly to a trustee. A trustee is required to find the best deal for both parties – which means they represent both you and your creditors. The trustee is the one with the power to determine what you can afford to pay, so entering the ring with a debt specialist who can represent your interests before any others will ensure you are protected.

    If you are considering a consumer proposal to help get rid of your debt, call DebtCare first. We represent you and only you. 1 (888) 890-0888.

     

  • Get Ready for 2016

    2016 is here! This year, make getting your finances back on track your goal – and then make it a reality! Schedule a free consultation to review your credit and finances to come up with a financial plan for the New Year!

    At DebtCare Canada, we can help you ring in the New Year with a plan to get rid of debt and rebuild your credit. Call us today at 1-888-890-0888.

    debt 1

  • Back to School Blues? Consolidate Credit Cards and Stop the Interest

    The back to school season, particularly for parents, is often a very hectic time of year, especially with regard to finances. The need/desire for new school clothes, shoes and supplies often leaves parents with racked up credit cards once all is said and done – or rather, purchased. And often accompanying these credit card bills is the challenge of finding money to pay them off.

    Check out this infographic from BMO to see just what these costs add up to:

    debt1

    So, what options are available? Consolidating credit cards is a great way to reduce your debt – and often makes sense – but the type of consolidation depends on your own personal circumstances. Here are a few options that may be available to help you deal with that back to school debt.

    1. Home equity loan. By using the equity in your home, you can consolidate credit cards, thereby reducing interest and consolidating the various bills into one monthly payment. Of course, this is only possible if you own a home and have sufficient equity for this purpose. If you rent, or are without equity, this is probably not going to be a viable option for you.
    2. Consumer proposal. This is another great option, especially if your credit isn’t great or if you don’t have the security or equity for a loan. A consumer proposal will have some impacts on your credit in the short term, but this is balanced out by the fact that interest stops accumulating, there is, like a loan, just a single monthly payment, and in many cases the overall debt owing is reduced.
    3. Line of credit or loan from a lender. This is another good option, and can achieve the same things as a home equity loan: lower interest and one monthly payment. You will need to have good credit or security for this option. At the same time, this is often the most expensive option of all because it will involve higher interest than a home equity loan or a consumer proposal.

    Kids are expensive, and when back to school season rolls around, they can become even more so. Once those bills start coming in, don’t stress. Call DebtCare Canada to find out about how to consolidate credit cards and get rid of debt: 1-888-890-0888.